Overview

• FY25 saw inflation fall to an eight-year low of 4.5%, enabling 1,100 basis points of policy-rate cuts and helping deliver a current account surplus supported by remittances and external inflows.
• Fiscal consolidation brought the overall deficit to a nine-year low and a second consecutive primary surplus, with credit rating upgrades recorded between April and August 2025.
• Floods in Punjab and Khyber-Pakhtunkhwa damaged major kharif crops, with the SBP cautioning about supply disruptions, potential price pressures, weaker inputs for agro-industries, and reconstruction outlays straining budgets.
• The report highlights a chronic savings–investment gap and one of the lowest domestic savings rates among peers, noting interest payments routinely outstrip development spending and reinforce a debt spiral.
• Weak financial intermediation and shallow capital markets limit private investment, as heavy government borrowing, low deposit mobilisation, and widespread informal saving persist alongside calls for agricultural resilience and industrial diversification.